Traits Affecting Household Livestock Marketing Decisions in Rural Kenya Katherine L. Baldwin Department of Agricultural Economics Purdue University Vanessa DeVeau Department of Agricultural Economics Purdue University Ken Foster Department of Agricultural Economics Purdue University Maria Marshall Department of Agricultural Economics Purdue University May 2008 Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Orlando, FL, July 27-29, 2008 Copyright 2008 by Katherine Baldwin, Vanessa DeVeau, Ken Foster, and Maria Marshall. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Attachment C
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Traits Affecting Household Livestock Marketing Decisions in Rural Kenya
Katherine L. Baldwin Department of Agricultural Economics
Purdue University
Vanessa DeVeau Department of Agricultural Economics
Purdue University
Ken Foster Department of Agricultural Economics
Purdue University
Maria Marshall Department of Agricultural Economics
Purdue University
May 2008
Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Orlando, FL, July 27-29, 2008 Copyright 2008 by Katherine Baldwin, Vanessa DeVeau, Ken Foster, and Maria Marshall. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.
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Abstract
While many contemporary development programs with regard to Sub-Saharan Africa’s
pastoralists promote improved livestock marketing as a way out of poverty, they also fail to take
into account the multi-functionality of livestock within these communities, and thus are doomed
to failure. While livestock are a main source of income for the pastoralist household, they also
serve a purpose as a store of wealth, food source, and status symbol. Furthermore, cattle and
smallstock (sheep and goats) fulfill each function to a different degree. Since livestock are so
multi-functional, marketing projects could better achieve their objectives if they had a more
accurate picture of what motivates household livestock sale decisions.
To get a better understanding of why livestock are sold in one community of Central
Kenya, we regressed household offtake rate of both cattle and smallstock against certain
household characteristics, including number of household members, number of children,
education, and employment. Additionally, we used a logit model to determine if those same
characteristics affect the overall decision to sell instead of just the offtake rate. We found that
employment or self-employment of at least one household member significantly affected both
offtake rate and sale decision. In addition, the number of household members and number of
children in school had varying affects on cattle and smallstock offtake rates. The results
regarding smallstock suggest that they are considered a more liquid asset, so perhaps future
programs should target increasing the profitability of smallstock production as opposed to cattle
production. Overall, our analysis shows that community livestock sales are motivated by factors
other than price, and as such should be considered in the design of any future marketing
programs.
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Introduction
Economists have proposed a myriad of schemes to eradicate pastoralist poverty in Kenya.
Because pastoralist economies depend almost exclusively upon livestock production, most recent
projects have focused on how to help pastoralists increase cattle offtake or take advantage of
higher prices and thus increase producer surplus. While some approaches have shown progress
in specific areas, each community has its own needs and idiosyncrasies that cannot be
overlooked when designing marketing programs.
These development strategies are further complicated when the secondary goal of
wildlife conservation is added to necessary project outputs. Achieving both an increase in
income for local people and a decrease in cattle numbers requires an increase in offtake rates, but
raising prices may not entice pastoralists to sell in all cases. First, a detailed study of the
community must be undertaken in order to understand the marketing motivations of households,
giving some insight into the reasons why producers keep and market livestock. Second, one
must recognize that accurate price information is typically lacking in places like rural Kenya, and
even if it is available the mechanisms by which animals are moved to markets and the
structure/conduct of markets may limit the importance of price in marketing decisions. Rather,
household characteristics may be more important motivating factors behind livestock sales.
Pastoralist policy decision-making has entered a new era of community-based solutions,
but a failure to recognize why producers sell cattle in the first place may derail marketing
projects before they get off the ground. By identifying the characteristics of pastoralist
households that market both cattle and smallstock1, more viable long-term development projects
1 We use the term “smallstock” to represent livestock such as sheep and goats. Past literature has commonly used, as an etymological hybrid, the word “shoat” to refer to this class of livestock. We feel that is important to note that the word shoat has a very specific definitional meaning that is quite different than what is intended. Properly defined, a shoat is a young pig; a category of livestock that one is unlikely to encounter in rural Kenya.
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may be feasible that provide increased benefits to producers, wildlife, and the broader pastoral
community economies.
Review of the Literature
While Fratkin (1997) describes three categories of pastoralist literature, the bulk of
development schemes have been motivated by the ecological body of work. Though many
ecological studies, such as that of Dahl and Hjorst (1976), focused on the economics of herding
and pastoralist production, the dominant vein beginning in the late 1960’s followed Hardin’s
“Tragedy of the Commons” thesis – because pastoralist land was held communally, the system
was subject to abuse by individuals who do not internalize the social cost. This free rider
mentality leads to a decline in the resource base and a subsequent loss of productivity for the
whole community.2 Instead of being seen as adaptable innovators living off of marginal lands,
pastoralists were blamed for desertification and wildlife population decline.
Many national policies and donor strategies were designed around Hardin’s theories.
Development experts viewed the economic viability of pastoralism as insufficient to sustain Sub-
Saharan Africa’s growing population, and thus advocated land privatization and a comprehensive
shift to more western-style production. The shift included projects such as the construction of
boreholes, livestock marketing schemes, and disease eradication programs, with the common end
goal of pastoralists marketing healthier cattle for profit and decreasing their need to keep large
herds. Unfortunately, programs like these upset the ecological order of pastoralist production
and ignored the multi-functionality of livestock within these communities. To pastoralists,
2 This story requires either that the individual is ignorant of the decisions being made by others and the joint consequences or heavily discounts their own future well-being in favor of the present. Due to the high degree of uncertainty about the future and the lack of functioning financial institutions it is highly likely that Kenyan pastoralists might fall prey to the latter.
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livestock are food source, bank account, status object, source of income, and an essential thread
in the fabric of community relations. Anthropologists argued that ignoring these additional uses
would cause project failure, and they were correct. Likewise, to the extent that the projects
improved survival rates of livestock and access to markets, they also increased the economic
incentives to produce cattle and may have actually worked counter to their intent.
The mid-1990’s saw a reversal in the ecological thesis of Hardin that led to an array of
new development policy options. The work of Behnke and Scoones (1992), among others, at the
beginning of the decade showed the climates inhabited by pastoralists to be so inherently
unstable that these changes, not overstocking, were at fault for the cited land degradation.
Traditional pastoralist land management was also found to be more efficient and sustainable than
any implemented western-based alternatives. Given these developments, policy advocates have
shifted their focus to community-based initiatives, banking advocacy, alternative enterprises, and
information distribution regarding both livestock prices and drought early-warning systems.
New marketing programs are offering both sale opportunities and alternative forms of saving,
taking into account the total value of an animal’s functions, not just its commercial potential.
While these new approaches seem more promising than the misguided development
schemes of the past, not all schemes are suitable for individual communities. The idiosyncrasies
of each community regarding their access to infrastructure, forage availability, and willingness to
adopt new technologies and production methods is tantamount to increasing pastoralist
productivity, incomes, and standard of living. Additionally, successful approaches must account
and compensate for all functions of livestock. The people of the Il Ngwesi community of
Central Kenyan have presently arrived at this crossroad of selecting their future economic
development strategy.
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Il Ngwesi, Laikipia District, Kenya
Geographically, the pastoralist community of Il Ngwesi lies to the northeast of Mt. Kenya
in the central part of the country. The community’s land abuts Lewa Wildlife Conservancy to
the South and East, Borana Ranch to the South and West, and open rangeland to the north
inhabited by a mixture of Somalis and Samburu. The community members identify themselves
as Laikipia Maasai.
Because of the group ranch’s shared borders with two wildlife conservancies, the owner
of Lewa approached community elders in the late 1980’s and asked them to consider wildlife
conservation as an alternative to the pastoralist ranching lifestyle. The owners of Lewa helped
nudge Il Ngwesi toward embracing conservation by building schools, paying for school fees,
sponsoring self-help groups, and allowing community livestock to graze on Lewa in a controlled
manner. With the cooperation of Lewa, Il Ngwesi community discussions ensued, and in 1995
members finally agreed to set aside a large tract of communal land designated exclusively for
conservation.
A tourist resort was built in this area, and community members residing there were forced
to move to lands to the south and east. These new settlement areas are referred to as
“neighborhoods” by community members. The neighborhoods differ in annual rainfall,
elevation, infrastructure, and land tenure – in some areas, group ranch members hold private land
titles while land is divided up communally in others. The residents of the private tenure
neighborhoods of Chumvi, Ethi, and Ngare Ndare display more wealth than their counterparts in
the communal neighborhoods of Leparua, Nadungoro, and Sanga. All of these neighborhoods
and their orientations with respect to Lewa can be seen in Figure 1 below.
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Figure 1
Because of its communality and proximity to the original group ranch (now conservation
area), Leparua is considered the baseline against which all other neighborhoods are compared.
Other characteristics of Leparua include low elevation, low rainfall, and relative proximity to the
town of Isiolo, as well as a common border with Lewa. Sanga has a climate similar to that of
Leparua, but its higher elevation eliminates the possibility of cultivation. Additionally, its
isolation from Lewa and any population centers make commerce difficult. Nadungoro is on the
community’s western edge, bordering Sanga and the Borana Ranch. The neighborhood has
many forested areas and receives moderate rainfall. It is also the closest neighborhood to the bi-
weekly livestock market and bazaar held at Dol Dol.
Ngare Ndare borders Lewa and Borana Ranch on the south. It has the advantage of
running the length of a non-seasonal river, making intensive irrigation and the small-scale
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cultivation of high-value crops like spring onions possible. Chumvi and Ethi lie to the south and
west of Ngare Ndare. Both are close to the town of Timau and the A2 highway, so commerce is
much easier than in the rest of the community. Moderate rainfall, an elevation conducive to
wheat and corn cultivation, and private land tenure combine to make the area idea for small-
holder farming.
Like more than a dozen other communities in the arid northern portion of Kenya, Il
Ngwesi group ranch is a member of the Northern Rangelands Trust (NRT), an NGO that
attempts to facilitate economic development in these pastoralist communities who pledge to
dedicate a portion of their land to conservation. This is done through community planning and
dialogue, business advisement, microfinance opportunities, marketing of tourist facilities, and the
securing of international donors.
Linking Livestock Markets to Wildlife Conservation
Because Il Ngwesi has been under the umbrella of NRT since its inception, the
organization selected the community for its “Linking Livestock Markets to Wildlife
Conservation” pilot project. The project’s goal is to increase livestock sale offtakes by
increasing revenue per animal. NRT’s perspective is that this will encourage producers to keep
fewer livestock as a buffer against price shocks and thus leave community members free to
dedicate more land to wildlife conservation. Toward this end, they have implemented a buy and
fatten program where strictly community cattle are purchased for a set price per kilo, thus
reducing cattle sale uncertainty in the form of weight lost on the trek to market, potential buyer
collusion, or the possibility of not selling.
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But programs like these tend to discount the fact that livestock in pastoralist communities
serve several purposes and pure enterprise income generation may not be the most important of
those. Earlier we alluded that price information may be of limited importance in this
environment because even if it were available, livestock are often trekked overland for days to
market, and markets meet only infrequently and suffer from asymmetries in market power
between buyers and sellers so that any price expectations are likely to be highly inaccurate.
Furthermore, livestock in the Kenyan pastoralist setting are held as a store of wealth in the
absence of any reliable and efficient financial institutions or capital markets. Additionally, milk
and milk products comprise a significant portion of daily caloric intake, such that marketing of
female cattle is uncommon for all but the largest stock holders.
As livestock are such a multi-faceted household asset, it follows that households should
only be willing to part with them when more pressing needs arise. By analyzing household
marketing decisions with respect to household characteristics, we hope to shed light on the
factors that motivate households to sell animals. If other household characteristics are found to
correlate highly to the the household offtake rate and the overall decision to sell or not sell, then
these factors should be taken into consideration in the formulation of destocking programs such
as that proposed by NRT.
Given the emphasis placed on the multi-functionality of livestock in the literature, the
implication is that households will treat livestock similarly to a savings account or stock portfolio
and typically (and perhaps reluctantly) only sell livestock to cover cash shortfalls when certain
necessary expenditures arise. Depending upon the household liquidity of livestock, animal sales
may take place frequently to cover living expenditures or infrequently to cover lumpy expenses
such as school fees, tuitions, and uniforms. Additionally, pastoralist households likely hold
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livestock as a buffer against future uncertainties and obligations that cannot be completely
foreseen.
To the extent that the household has other sources or potential sources of income, such
motivation may be reduced. That is, if a member(s) of the household has other employment or
education that provides them with the means to meet future unexpected obligations then, at the
margin, their propensity to sell livestock in the short run should be lower, ceteris paribus.
Alternatively, those household heads with education may have improved bargaining skills and/or
better access to markets and thus be able to receive higher prices; reducing the number of
animals they must sell to meet various obligations.
It is important to emphasize the difference between holding wealth in the form of
livestock versus savings and stock accounts. Livestock holdings can only be liquidated in lumpy
discreet units whereas, by comparison, a savings account is almost infinitely divisible. This
characteristic makes livestock a rather illiquid asset and may have implications both for
marketing decisions and explain some of the shift toward small stock that allow the holder to
liquidate a smaller portion of their total asset base to cover the various cash expenses discussed
above.
Methodology
Data Collection
The data for this study was collected in and around Il Ngwesi under NRT’s “Linking
Livestock Markets to Wildlife Conservation” pilot study. A multipart survey, including sections
on household demographics, livestock holdings and marketing decisions, wildlife damage,
income diversification, and attitudes toward tourism and wildlife conservation, was conducted in
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all neighborhoods of the community from August through December of 2007. This was done
with the help of three enumerator/translators from the community. Households were selected at
random, and the sample includes approximately 35% of the community’s entire population. In
all, 218 households were surveyed, and their survey answers and demographic information forms
the basis for this analysis.
Data Analysis
Much of the literature analyzed asserts that cattle, sheep, and goats fulfill many other
household functions aside from being a source of income. Some of these alternate uses include
food source, store of wealth, and symbol of status within the community. Even though each type
of animal can serve each of these purposes3, the extent to which each household depends upon
cattle versus smallstock for each function will vary. In addition, the differences in liquidity of
the two types of animals may lead to different sale motivations and marketing patterns. For this
reason, separate regressions were analyzed for cattle and smallstock rather than pooling them
under the guise of total livestock units. For both cattle and smallstock, our focus was
concentrated upon the factors that affected offtake rate, as well as the overall decision to sell or
not sell animals.
Regressions 1 & 2: Cattle and Smallstock Offtake Rates
To gain some insight into household livestock sale motivations, several household
characteristics were regressed against offtake rate (calculated by dividing the number of animals
sold in 2006 by the current herd size). Offtake rate was used as opposed to the “number of cattle
sold” because the number of animals sold was highly dependent upon the initial herd size. The
calculation was done in order to normalize the sales of different-sized cattle enterprises for a 3 Smallstock typically do not offer the same level of status that cattle confer to the owner.
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more useful comparison, as there is a substantial income gap (and herd size gap) within the
community.
For cattle offtake rate, the model is expressed as:
While it seems that the offtake rate regressions above would be the most enlightening
regarding the characteristics affecting household sale rate, a surprising percentage of households
chose not to sell at all – almost 60% of households surveyed had not sold cattle in the previous
year, and 34% had not sold any smallstock4, though 83% of households surveyed owned cattle
and 91% owned smallstock. For this reason, we wanted to know what characteristics, if any, 4 It is worthwhile to note that the much greater percentage of households selling smallstock versus that for cattle supports our argument concerning the greater liquidity of smallstock and the resulting increased propensity to sell.
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separate sale households from no-sale households. Because the dependent variable was a yes/no
decision, logit regression was used for this estimation. The following model was used: